The UK communications regulator Ofcom has today announced that BT Group has agreed to Ofcom’s requirements for the legal separation of its network division, Openreach. This follows a period of negotiations between Ofcom and BT about some key elements of the form that further separation of Openreach from BT would take.

Under the voluntary agreement, Openreach is expected to take decisions at further arm’s length from the rest of BT, in particular BT retail. This should lead to more weight being given to the requirements of retail rivals such as Sky and Talk Talk, that use Openreach’s network to offer retail services, when Openreach makes investment and quality of service decisions.

BT’s rivals in general welcomed the announcement. The deal has also removed uncertainty around the separation plans, with BT’s share prices up around 3 to 4% today. Whether the deal will deliver the improvements in quality of service and digital infrastructure investment that are hoped for is likely to reflect BT’s incentives to deliver them. It remains to be seen whether these incentives have changed as a result of this agreement.

Frontier Economics has advised stakeholders on the impact of different forms of separation on competition and investment, including in the UK and other jurisdictions.